mitigate the impact of the restrictions on energy usage to date by managing our scheduling at the impacted facilities.

Twinsburg ConsolidationACQUISITIONS

Airex, LLC:In September 2021,On June 17, 2022, the Company announced its plans to consolidate its manufacturing facility in Twinsburg, Ohio with its Watertown,acquired 100% of the membership interests of Airex, LLC (“Airex”), a privately-owned New YorkHampshire headquartered developer of high precision electromagnetic products and Reynosa, Mexico facilities in 2022. Costs of $545 are included in business development on the consolidated statement of income and comprehensive incomesolutions for the year ended December 31, 2021 relatedaerospace and defense, life sciences, semiconductor, and commercial industrial applications. Airex combines its patented winding technology with robotic manufacturing to produce linear motors – ironless and iron core, rotary motors, voice coils, wound electromagnetic components and sub-components. Airex expands the Company’s motor offerings as well as enhances its quality systems to support broad mission critical defense programs, as well as other high demanding industries such as life sciences and semiconductor.

FPH Group: On May 30, 2022, the Company acquired 100% of the direct and indirect legal and beneficial ownership of the shares of FPH Group Inc., a corporation incorporated pursuant to the consolidationlaws of the Twinsburg facility. Total costsProvince of approximately $1,000 are expected to be incurredOntario and the membership interests of Transtar International, LLC, a Michigan limited liability company, collectively “FPH”. FPH is an Ontario, Canada headquartered industry leader in connectionthe development of technically advanced, reliable and cost-effective electrical drive systems which provide high torque and precision motion for the defense industry, as well as light weighting technologies for existing and future ground-based vehicles in the defense industry. FPH provides concept engineering, prototyping, validation, and production. FPH also develops composites, advanced materials and hybrid products and solutions that achieve significant weight reduction and higher strength. This acquisition provides the Company with this initiativea deeper penetration within defense applications including the necessary manufacturing licenses and will include accelerated lease costs, severance and other payroll related costs, legal costs, accelerated depreciation, and costs to relocate inventory and machinery and equipment. This initiative is expected to be completed during the second quarter of 2022.certifications.

Stock SplitThinGap, Inc.:

On April 30, 2021, we effectedMay 24, 2022, the Company acquired 100% of the outstanding stock of ThinGap, Inc. (“ThinGap”), a 3-for-2 stock split. Referencesprivately-owned California headquartered developer and manufacturer of high performance, zero clogging slotless motors for use in aerospace, defense, and medical applications that require precise performance in a compact, yet high-torque-to-volume solutions. ThinGap designs, engineers, and manufactures low profile, brushless DC motor kits and assemblies that utilize a proprietary wave-wound stator architecture and highly optimized rotors. ThinGap expands the Company’s precision motion capabilities and advances its strategy to numbers of shares of common stock and per share data have been adjusted to reflect the stock split on a retrospective basis. Refer to Note 1, Business and Summary of Significant Accounting Policiesprovide integrated motion solutions in the notes the consolidated financial statements contained in Item 8 of this report for further information.

Cyber Breach

During the second quarter 2021, we were the subject of a cyber security breach. We discovered the issue soon after the intrusionrobotics, semiconductor, and implemented our contingency and disaster recovery plans, including engaging legal, security and forensic experts in this field. We were able to contain the issue and were successful in getting our operations back up and running without a material impact to our results. We have implemented additional security measures that further safeguard our systems. No ransom was paid related to this breach.

ACQUISITIONSinstrumentation markets.

Spectrum Controls: On December 30, 2021, we acquired Spectrum Controls, Inc. (“Spectrum Controls”), a Washington headquartered innovator and manufacturer of I/O and Universal Communications Gateway products. Spectrum Controls designs and manufactures a wide range of highly sophisticated I/O modules, marquee displays, and

level solutions with embedded electronics across our other major served markets. The acquisition of Dynamic Controls allows us to build out our ability to leverage controlled motion system solutions in a wide range of markets.

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MARKETS AND APPLICATIONS

One of theThe Company’s growth initiatives includes product line platform development to meetstrategy is focused on becoming the emerging needs ofrecognized leader in designing products and innovating controlled motion solutions in its selected target markets.  Themarkets by further developing its products and service platform to utilize multiple Allied Motion technologies to provide enhanced solutions, products, and value for its customers. Our strategy further defines Allied Motion as being a “technology/know-how” driven company and to remain successful, the company continuously invests in its area of excellence.

This platform development emphasizes a combination of technologies to create increasedenhanced products, solutions, and value solutions for customers.to meet the emerging needs of the Company’s selected target markets.  The emphasis on new opportunities has alloweddriven the Company to evolve from being an individual component provider to becoming a solutions provider emphasizing the utilization of  multiple Company technologies in a system solution approach.  The Company believesIn addition to enhanced products, solutions, and value for our customers, this approach is allowing the Company to improve margins. We expect our recent acquisitions will allow it to provide increased value to its customers and improved margins for the Company.further drive our success. Our strong financial condition, along with Allied Systematic Tools (“AST”) continuous improvement initiatives in quality, delivery, and cost provide a positive outlook for the continued long-term growth and profitability of the Company.

The Company’s growth strategy is focused on becoming the recognized controlled motion solution leader in its selected target markets by further developingCompany sells its products and services platform to utilize multiple Allied Motion technologies to create increased value solutions for its customers.  Our strategy further defines Allied Motion as being a “technology/know-how” driven company and to be successful, the Company continues to invest in its areas of excellence.

The Company sells its products into a subset of the following broad markets:

Industrial: products and solutions are used in factory automation, specialty equipment, material handling equipment, commercial grade floor polishers and cleaners, commercial building equipment such as welders, cable pullers and assembly tools, the handling, inspection, and testing of components and final products such as PCs, high definition printers, tunable lasers and spectrum analyzers for the fiber optic industry, test and processing equipment for the semiconductor manufacturing industry, power quality products to filter distortion caused by variable frequency drives and other power electronic equipment, nano technology motion systems in silicon photonics, micro assembly, digital pathology, genome sequencing, laser processing and microelectronics, PLC manufacturers and distributors.

Vehicle: electronic power steering and drive-by-wire applications to electrically replace, or provide power-assist to, a variety of mechanical linkages, traction / drive systems and pumps, automated and remotely guided power steering systems, various high performance vehicle applications, actuation systems (e.g., lifts, slide-outs, covers, etc.), HVAC systems, solutions to improve energy efficiency of vehicles while idling and alternative fuel systems such as liquified petroleum gas (“LPG”), fuel cell and hybrid vehicles. Vehicle types include off- and on-road construction and agricultural equipment; trucks, buses, boats, utility, recreational (e.g., RVs, ATVs (all-terrain vehicles), specialty automotive, automated and remotely guided vehicles).

Medical: surgical robots, prosthetics, electric powered surgical hand pieces, programmable pumps to meter and administer infusions associated with chemotherapy, pain control and antibiotics, nuclear imaging systems, radiology

equipment manufacturers (“OEMs”).

Allied Motion Sales Organization:

The Company’s sales organization is focused on becoming the best sales and service force in its industry. Through the One Team approach for providing products and controlled motion solutions and components that best address customers’ needs, the Company has broadened the knowledge and skills of its direct sales force, while creating sales and service support in its Solution Centers. This enables the entire sales organization to be capable of selling all products designed, developed and produced by Allied Motion globally. The Company’s primary channels to market include the direct sales force and external authorized Sales Representatives, Agents and Distributors that provide field coverage in Asia-Pacific, Europe, Canada, Israel and the Americas. While the majoritymost of the Company’s sales are directly to OEMs, it is working to expandhas expanded its market reach through Distribution channels.

Allied Motion Solution Centers:

Allied Motion has Solution Centers in China, Europe and North America that enable the design and sale of individual component products as well as integrated controlled motion systems that utilize multiple Allied Motion products and technology.technologies. In addition to providing sales and applications support, the solution center function may include final assembly, integration and tests as required to support customers within their geographic region.

Sales Backlog:

Backlog as of December 31, 20212022 was $249,927$330,078 compared with $141,344$249,927 as of December 31, 2020.2021. Included in backlog as of December 31, 20212022 is $47,934$21,222 from the acquisitions completed in the fourth quarter of 2021.2022. The time to convert the majority of backlog to sales is approximately three to nine months. Given the short product lead times, we do not believe that the amount of our backlog of orders is a reliable indication of our future sales. We may on occasion receive multi-year orders from customers for product to be delivered on demand over that time frame. There is no assurance that the Company’s backlog from these customers will be converted into revenue.

Major Customer

Sales to one customer were 11% of total sales in 2022 and 15% of total sales in 2021 and 2020.2021. We believe the diversification of the target markets and customers we serve reduces our exposure to negative developments with any single customer.

Competitive Environment

Our products and solutions are sold into the global market with a large and diverse group of competitors that vary by product, geography, industry and application. We believe theThe controlled motion market is highly fragmented with many competitors, some of which are substantially larger and have greater resources than Allied Motion. We believe our competitive advantages include our electro-magnetic, mechanical and electronic controlled motion expertise, the breadth

has also resulted in increased operational challenges fromIn addition, workplace disruptions and restrictions on the movement of raw materials and goods, both at our own facilities and at our customers and suppliers leadinghas led to increases in prices and freight costs. As we seek to secure supply during these uncertainvolatile times, we have proactively increased the levels of certain inventories to put us in the position to meet the needs of our customers.customers on a timely basis.

Patents, Trademarks, Licenses, Franchises and Concessions

We hold a number ofseveral patents and trademarks for components manufactured by our various subsidiaries, and we have several patents pending on new products recently developed, which we believe are considered to be of significance.significant.

Working Capital Items

We currently maintain inventory levels adequate for our short-term needs based upon present levels of production.production while taking into account the potential for supply chain disruptions. We consider the component parts of our different product lines to be generally available and current suppliers to be reliable and capable of satisfying anticipated needs under normal conditions. As discussed herein, as a result of the COVID-19 pandemic and supply chain disruptions, we have experienced increased costs and have purposely increased certain inventories to deal withmanage global supply chain issues.

Engineering and Development Activities

Our engineering and development (E&D) activities are for the development of new products, enhancement of the functionality, effectiveness and reliability of current products, to redesign products to reduce the cost of manufacturing of products or to expand the types of applications for which our products and solutions can be used. Our engineering and development expenditures for the years ended December 31, 2022 and 2021 were $38,561 and 2020 were $27,818, and $25,487, respectively, or 8% and 7% of sales in 2022 and 2021, and 2020.respectively. We believe E&D is critical to our ongoing success and expect to continue to invest at thesesimilar levels in the future. Of these expenditures, no material amounts were charged directly to customers, although we record non-recurring engineering charges to certain customers for custom engineering required to develop products that meet the customer’s specifications.

Environmental Issues

The Company takes its responsibility to be a good steward of the environment seriously and we adopt policies and procedures under the guidance of the Board of Directors that advance our performance. No significant pollution or other types of hazardous emission result from the Company’s operations and it is not anticipated that our operations will be materially affected by Federal, State or local provisions concerning environmental controls. Our costs of complying with environmental, health

We monitor existing and safety requirements are not material.

We do not believe that existing or pending climate change legislation, regulation, orand international treaties orand accords are reasonably likely to have a material effect in the foreseeable futureevaluate any potential impact on our business or markets that we serve, nor on ourfuture results of operations, capital expenditures or financial position. The boardBoard of directors provideDirectors provides oversight as part of their environmental, social and governance (“ESG”) initiatives and we will continue to monitor emerging developments and assess our performance in this area. We may face additional economic and

Human Capital

Employment

At December 31, 2021,2022, we employed approximately 1,9502,254 full-time employees worldwide. Of those, approximately 52%57% are located in North America, 37%33% are located in Europe and the remainder are located in Asia-Pacific. As of December 31, 2021, 19%2022, 18% of our total workforce were employed in engineering functions, demonstrating our commitment to invest significantly in engineering resources.

Human Capital Management

The Company believes that its workforce is one of the Company’s greatest assets, and it has a proactive human capital management and talent development program. The Board of Directors and Human Capital and Compensation Committee recognizes human capital as a key driver of long-term value and is responsible for oversight of the Company’s human capital management and talent development programs.

Employee Health and Safety

The Company complies in all respects with the national and local laws of the jurisdictions in which we operate regarding workers safety and health. The Company strives to continuously improve employee safety and health through consistent measurement and reporting on progress and leading indicators. It has programs that emphasize that each employee in the organization is responsible for safety in the workplace. The Company provides a comprehensive safety program that focuses on a zero-incident mindset by providing ongoing training opportunities and review of safety activities and initiative. This highly visible effort encourages employee engagement and active management and leadership involvement.

Human Capital Management​

The Company believes that its workforce is one​

Ethical Business Practices

The Company is dedicated to conducting its business with integrity and responsibility. The Company promotes honest and ethical conduct, and the Board has adopted a Code of Ethics and Business Conduct which applies to all employees, directors, and officers. The Company does not tolerate human rights abuses, human trafficking and or slavery, the use of child labor and will not engage or be complicit in any activity that solicits or encourages human rights abuse.

Item 1A. Risk Factors

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In the ordinary course of our business, we face various strategic, operating, compliance and financial risks. These risks could have a material impact on our business, reputation, financial condition or results of operations. Our most significant risks are set forth below and elsewhere in this Report. These risk factors should be considered in addition to our cautionary comments concerning forward-looking statements in this Report, including statements related to markets for our products and trends in our business that involve a number of risks and uncertainties.

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RISKS RELATED TO THE COVID-19 PANDEMIC

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Our financial condition and results of operations have been and may continue to be adversely affected by public health issues, including epidemics or pandemics such as COVID-19.

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The COVID-19 pandemic has subjected our business, operations, financial performance, cash flows and financial condition to a number of risks, including, but not limited to those discussed below.

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Operations-related risks: As a result of the COVID-19 pandemic, werisks. We have faced and are facing increased operational challenges and costs from the need to protect employee health and safety, workplace disruptions and restrictions on the movement of people, raw materials and goods, both at our own facilities and at our customers and suppliers. For example, we have experiencedThe COVID-19 pandemic continues to create challenges for the global economy, and will continue to experience incremental operating costs due to increased challenges with our workforce (including as a result of illness, absenteeism or government orders), access to necessary componentsthe ultimate impacts and supplies, and access to fundamental support services (such as shipping and transportation). The ultimate significance of these disruptionschallenges to our business, financial condition, results of operations, and cash flows will depend greatly on how long the disruptions continue. Any inability to operate at full capacity, and/or any similar delay with respect to resumptionfuture course of operations by one or more of our key suppliers, would result in further challenges to our business and may negatively affect our business, financial condition, results of operations, and cash flows.the COVID-19 pandemic.

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Customer-related risks: As a result of theThe COVID-19 pandemic there have been and could continue to bedrove changes in our customers’ priorities and practices, as our customers in both the United States and globally confront competing budget priorities and more limited resources. To the extent that COVID-19 continues to impact demand for our products and services andsolutions or impairs the viability of some of our customers, our financial condition, results of operations, and cash flows could be adversely affected, and those impacts could be material.

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Other risks: The magnitude and duration of the globalimpact of the COVID-19 pandemic continueson the global economy and the world’s response continue to be uncertain. AsTo the extent the pandemic continues to adversely affect portions of our business and our overall operating and financial results, it may also adversely affect our operating and financial results in a manner that is not presently known to us or that we currently do not expect to present significant risks to our operations or financial results. The extent of the pandemic’s effect on our business will depend on future developments, including the duration, spread and intensity of the pandemic and the successful distribution, acceptance, and acceptanceefficacy of vaccines for COVID-19, all of which are uncertain and difficult to predict.

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growth in our sales in non-U.S. markets. Our global operations are subject to numerous financial, legal and operating risks, such as political and economic instability; imposition of trade or foreign exchange restrictions, including in the U.S.; trade protection measures such as the imposition of or increase in tariffs and other trade barriers, including in the U.S.; unexpected changes in regulatory requirements, including in the U.S., prevalence of corruption in certain countries; enforcement of contract and intellectual property rights and compliance with existing and future laws, regulations and policies, including those related to tariffs, investments, taxation, trade controls, product content and performance, employment and repatriation of earnings. In addition, we are affected by changes in foreign currency exchange rates, inflation rates and interest rates.

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Our growth could suffer if the markets into which we sell our products and servicessolutions decline.

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Our growth depends in part on the growth of the markets which we serve. Any decline or lower than expected growth in our served markets could diminish demand for our products and services,solutions, which would adversely affect our financial results. Certain of our businessesWe operate in industries that may experience periodic, cyclical downturns. Demand for our products and servicessolutions is also sensitive to changes in customer order patterns, which may be affected by announced price changes, changes in incentive programs, new product introductions and customer inventory levels. Any of these factors could adversely affect our growth and results of operations in any given period.

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We could experience a failure of a key information technology system, process or site or a breach of information security, including a cybersecurity breach or failure of one or more key information technology systems, networks, processes, associated sites or service providers.

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We rely extensively on information technology (“IT”) systems for the storage, processing, and transmission of our electronic, business-related information assets used in or necessary to conduct business. We leverage our internal information technology infrastructures, and those of our business partners, to enable, sustain, and support our global business activities. In addition, we rely on networks and services, including internet sites, data hosting and processing facilities and tools and other hardware, software and technical applications and platforms, some of which are managed, hosted, provided and/or used by third-parties or their vendors, to assist in conducting our business. The data we store, and process may include customer payment information, personal information concerning our employees, confidential financial information, and other types of sensitive business-related information. Numerous and evolving cybersecurity threats pose potential risks to the security of our IT systems, networks and services, as well as the confidentiality, availability and integrity of our technology systems and data. In addition, the laws and regulations governing security of data on IT systems is evolving and adding another layer of complexity in the form of new requirements. In the past, we have had cybersecurity incidents and we have made, and continue to make investments, seeking to address these threats, including monitoring of networks and systems, hiring of experts to evaluate and test our systems, employee training and security policies for employees and third-party providers.

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The frequency and the techniques used in these attacks has increased significantly and may be difficult to detect for periods of time and we may face difficulties in anticipating and implementing adequate preventative measures. While the breaches of our IT systems to date have not been material to our business or results of operations, the costs of attempting to protect our IT systems and data will increase, and there can be no assurance that these added security efforts will prevent all breaches of our IT systems or thefts of our data. If our IT systems are damaged or cease to function properly, the networks or service providers we rely upon fail to function properly, or we or one of our third-party providers suffer a loss or disclosure of our business or stakeholder information due to any number of causes ranging from catastrophic events or power outages to improper data handling or security breaches (including ransomware, denial-of-service attacks, a malicious website, the use of social engineering and other means to affect the confidentiality, integrity and

could disrupt our ability to sell products and solutions or use and transfer data because such activities may not be in compliance with applicable laws. Additionally, cybersecurity incidents related to export control technology information of our Aerospace & Defense customers could subject us to additional reporting requirements, could disrupt our ability to sell products to those customers and could subject us to additional costs, penalties, and fines all of which may be material to our operating results.

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The Audit Committee of the Board of Directors isand Audit Committee are responsible for information security oversight and the Audit Committee is comprised entirely of independent directors. Additionally, two members of the Company’s Board of Directors have relevant information security and cybersecurity experience. As part of their oversight, senior leadership meets with the Audit Committee at least annually to discuss information security and cybersecurity matters.

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Over the last three years, the Company has experienced one known information security breach, in connection with a ransomware incident that occurred in June 2021. Over the last three years, costsCosts incurred related to the information security breachesbreach did not have a material adverse effect on our results of operations.operations in the years ended December 31, 2022, 2021, and 2020. However, as cybersecurity incidents continue to increase in scope, complexity, and frequency, we may be unable to prevent a significant incident in the future which may materially impact our results of operations. Every two to three years, theThe Company is audited by an external security services providerregularly undertakes audits and evaluations (including to the National Institute of Standards and Technology (NIST) SP 800-171 standardsstandards) and enhances its security framework based upon the results of those audits.audits and evaluations. For new associates, and on an annual basis therefore the Company requires associates to take security awareness training and has an on-going phishing recognition training and testing programs.

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We rely on suppliers to provide equipment, components and services, which creates certain risks and uncertainties that may adversely affect our business.

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Our business requires that we buy equipment, components and services from third parties. Our reliance on suppliers involves certain risks, including poor quality or an insecure supply chain, which could adversely affect the reliability and reputation of our products;products and solutions; changes in the cost of these purchases due to inflation, exchange rates, tariffs, or other factors; shortages of components, commodities or other materials, which could adversely affect our manufacturing efficiencies and ability to make timely delivery.

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Any of these uncertainties could adversely affect our profitability and ability to compete. The effect of unavailability or delivery delays would be more severe if associated with our higher volume and more profitable products.products and solutions. Even where substitute sources of supply are available, qualifying the alternate suppliers and establishing reliable supplies could cost more or could result in delays and a loss of sales.

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Certain materials and components used in our products and solutions are required and qualified to be sourced from a single or a limited number of suppliers. As such, some materials and components could become in short supply resulting in limited availability and/or increased costs. Additionally, we may elect to develop relationships with a single or limited number of suppliers for materials and components that are otherwise generally available, because some customers require extensive certification of suppliers which is a considerable and time consuming undertaking. Although we believe that alternative suppliers are available to supply materials and components to replace those currently used, doing so may require redesign work and would require having those new sources qualified by our customers prior to making use of those new alternatives. Any interruption in the supply from any supplier that serves as a sole source could delay product shipments and have a material adverse effect on our business, financial condition and results of operations.

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on imports, which could adversely affect our operations and our ability to import products at current or increased levels. We cannot predict whether additional U.S. and foreign customs quotas, duties, tariffs, taxes or other charges or restrictions, requirements as to where raw materials must be purchased, or other restrictions on our imports will be imposed upon the importation of our products and solutions in the future or adversely modified, or what effect such actions would have on our costs of operations.

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We face competition that could harm our business and we may be unable to compete successfully against new entrants and established companies with greater resources.

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Competition in connection with the manufacturing of our products and solutions may intensify in the future. The market for our technologies is competitive and subject to rapid technological change. We compete globally on the basis of product performance, customer service, availability, reliability, productivity and price. Our competitors may be larger and may have greater financial, operational, economies of scale, personnel, sales, technical and marketing resources than us. Certain of our competitors also may pursue aggressive pricing or product strategies that may cause us to reduce the prices we charge for our original equipment and aftermarket products and services or lose sales. These actions may lead to reduced revenues, lower margins and/or a decline in market share, any of which may adversely affect our business, financial condition and results of operations.

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Quality problems with our products and solutions could harm our reputation, erode our competitive advantage and could result in warranty claims and additional costs.

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Quality is important to us and our customers, and our products and solutions are held to high quality and performance standards. In the event our products and solutions fail to meet these standards, our reputation could be harmed, which could damage our competitive advantage, causing us to lose customers and resulting in lower revenues. We generally allow customers to return defective or damaged products for credit, replacement, repair or exchange. We generally warrant that our products and solutions will meet customer specifications and will be free from defects in materials and workmanship. We reserve for our exposure to warranty claims based upon recent historical experience and other specific information as it becomes available. However, these reserves may not be adequate to cover future warranty claims and additional warranty costs or inventory write-offs may be incurred which could harm our operating results.

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If we are unable to attract and retain qualified personnel, our ability to operate and grow our company will be in jeopardy.

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We are required to hire and retain skilled employees at all levels of our operations in a market where such qualified employees are in high demand and are subject to receiving competing offers. We believe that there is, and will continue to be, competition for qualified personnel in our industry, and there is no assurance that we will be able to attract or retain the personnel necessary for the management and development of our business. The inability to attract or retain employees currently or in the future may have a material adverse effect on our business.

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Our future success depends in part on the continued service of our engineering and technical personnel and our ability to identify, hire and retain personnel.

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Our success will depend in large part upon our ability to attract, train, retain and motivate highly skilled engineering and technical employees. There is currently aggressive competition for employees who have experience in technology and engineering. We may not be able to continue to attract and retain engineers or other qualified technical personnel

demands on product pricing and on contractual terms, often resulting in the allocation of risk to us as the supplier. Our ability to maintain strong relationships with our principal customers is essential to our future performance. If we lose a key customer, if any of our key customers reduce their orders of our products and solutions or require us to reduce our prices before we are able to reduce costs, if a customer is acquired by one of our competitors or if a key customer suffers financial hardship, our operating results would likely be harmed as well as the collectability of accounts receivable.

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If we do not respond to changes in technology, our products and solutions may become obsolete and we may experience a loss of customers and lower revenues.

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We sell our products and solutions to customers in several industries that experience rapid technological changes, new product introductions and evolving industry standards. Without the timely introduction of new products and enhancements,solutions, our products and servicesofferings will likely become technologically obsolete over time and we may lose a significant number of our customers. Our product and solutions development efforts may be affected by a number of factors, including our ability to anticipate customer needs, allocate and process our research and development funding, innovate and develop new products, differentiate our offerings and commercialize new technologies, secure intellectual property protection for our products and manufacture products in a cost-effective manner. We would be harmed if we did not meet customer requirements and expectations. Our inability, for technological or other reasons, to successfully develop and introduce new and innovative products and solutions could result in a loss of customers and lower revenues.

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We face the challenge of accurately aligning our capacity with our demand.

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We have experienced capacity constraints and longer lead times for certain products and solutions in times of growing demand and have also experienced idle capacity as economies slow or demand for certain products decline. Accurately forecasting our expected volumes and appropriately adjusting our capacity have been, and will continue to be, important factors in determining our results of operations. We cannot guarantee that we will be able to increase manufacturing capacity to a level that meets demand for our products and solutions, which could prevent us from meeting increased customer demand and could harm our business. However, if we overestimate our demand and overbuild our capacity, we may have significantly underutilized assets and we may experience reduced margins. If we do not accurately align our manufacturing capabilities with demand it could have a material adverse effect on our results of operations.

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The manufacture of many of our products and solutions is a highly exacting and complex process, and if we directly or indirectly encounter problems manufacturing products, our reputation, business and financial results could suffer.

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The manufacture of many of our products and solutions is an exacting and complex process. Problems may arise during manufacturing for a variety of reasons, including equipment malfunction, failure to follow specific protocols and procedures, problems with raw materials, natural disasters and environmental factors, and if not discovered before the product is released to market could result in recalls and product liability exposure. Because of the time required to develop and maintain manufacturing facilities, an alternative manufacturer may not be available on a timely basis to replace such production capacity. We have also undertaken certain manufacturing footprint rationalization activities, which may include new challenges related to management and monitoring of the manufacturing of our products and solutions. Any of these manufacturing problems could result in significant costs and liability, as well as negative publicity and damage to our reputation that could reduce demand for our products.

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STRATEGIC RISKS

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Our strong organic growth has been and will continue to be enhanced by strategic acquisitions that complement, enhance or expand our business. We may not be able to find or complete these transactions, and, if completed, we may experience operational and financial risks in connection with our acquisitions that prevent us from realizing the anticipated benefits and may materially adversely affect our business, financial condition and operating results.

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Acquisitions are part of our strategic growth plans. We may have difficulty finding these opportunities, or if we do identify these opportunities, we may not be able to complete the transactions for various reasons including a failure to secure financing.

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To the extent thatAs we are able to complete the transactions (including our recent acquisitions, of Dynamic Controls, ORMEC, ALIO and Spectrum Controls), we will face the operational and financial risks commonly encountered with an acquisition strategy. These risks include the challenge of integrating acquired businesses while managing the ongoing operations of each business, the challenge of combining the business cultures of each company, and the need to retain key personnel of our existing business and the acquired business. The process of integrating operations could cause an interruption of, or loss of momentum in, the activities of the acquired business and our existing business. Members of our senior management may be required to devote considerable amounts of time to the integration process, which will decrease the time they will have to manage our businesses, service existing customers, attract new customers and develop new products. If our senior management is not able to effectively manage the integration process, or if any significant business activities are interrupted as a result of the integration process, our business could be adversely affected.

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The indemnification provisions of acquisition agreements by which we have acquired companies may not fully protect us and as a result we may face unexpected liabilities.

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Certain of the acquisition agreements by which we have acquired companies require the former owners to indemnify us against certain liabilities related to the operation of the company before we acquired it. In most of these agreements, however, the liability of the former owners is limited, and certain former owners may be unable to meet their indemnification responsibilities. We cannot assure that these indemnification provisions will protect us fully or at all, and as a result we may face unexpected liabilities that adversely affect our financial results.

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We intend to develop new products and solutions and expand into new markets, which may not be successful and could harm our operating results.

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We intend to expand into new markets and develop new and modified products and solutions based on our existing technologies and engineering capabilities, including the continued expansion of our controlled motion systems and

implementation of our enterprise resource planning system, launch of a new integrated website, implementation of a structured approach to identify target markets, and the expansion of our AST (continuous improvement initiatives in quality, delivery, and cost). The failure to achieve our objectives on these initiatives could have an adverse effect on our operating results and financial condition. Our global optimization strategy includes localization of our products, solutions, and services to be closer to our customers and identified growth opportunities. Localization of our products and services includes expanding our capabilities, including supply chain and sourcing activities, product design, manufacturing, engineering, marketing and sales and support. These activities expose us to risks, including those related to political and economic uncertainties, transportation delays, labor market disruptions and challenges to protect our intellectual property.

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FINANCIAL RISKS

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Foreign currency exchange rates may adversely affect our financial results.

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Sales and purchases in currencies other than the U.S. dollar expose us to fluctuations in foreign currencies relative to the U.S. dollar and may adversely affect our financial results. Increased strength of the U.S. dollar increases the effective price of our products sold in U.S. dollars into other countries, which may require us to lower our prices or adversely affect sales to the extent we do not increase local currency prices. Decreased strength of the U.S. dollar could adversely affect the cost of materials, products and services we purchase from non-U.S. denominated locations. Sales and expenses of our non-U.S. businesses are also translated into U.S. dollars for reporting purposes and the strengthening or weakening of the U.S. dollar could result in unfavorable translation effects. The Company also faces exchange rate risk from its investments in subsidiaries owned and operated in foreign countries.

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Economic and credit market uncertainty could interrupt our access to capital markets, borrowings, or financial transactions to hedge certain risks, which could adversely affect our financial condition.

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To date, we have been able to access debt and equity financing that has allowed us to make investments in growth opportunities and fund working capital requirements. In addition, we enter into financial transactions to hedge certain risks, including foreign exchange and interest rate risk. Our continued access to capital markets, the stability of our lenders and their willingness to support our needs, and the stability of the parties to our financial transactions that hedge risks are essential for us to meet our current and long-term obligations, fund operations, and fund our strategic initiatives. An interruption in our access to external financing or financial transactions to hedge risk could affect our business prospects and financial condition.

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Our indebtedness may limit our operations and our use of our cash flow, and any failure to comply with the covenants that apply to our indebtedness could adversely affect our liquidity and financial results.

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Our ability to service our indebtedness depends on our financial performance, which is affected by prevailing economic

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In addition, certain of our variable rate debt uses London Interbank OfferTerm Standard Overnight Financing Rate ("LIBOR"SOFR") as a benchmark for establishing the interest rate, a portion of which is hedged with LIBOR-basedLondon Interbank Offering Rate (“LIBOR”) based interest rate derivatives. LIBOR has been the subject of proposals for reform, and is currently scheduled to be discontinued on June 30, 2023. While allThe Company expects to amend LIBOR-based interest rate derivative agreements by negotiating new SOFR-based agreements. The discontinuation of our material financing arrangements indexed to LIBOR provide procedures for determining an alternative base rate when LIBOR is discontinued, there can be no assurances asnot expected to whether such alternative basematerially impact our interest rate will be more or less favorable than LIBOR. We intend to monitor developments with respect to the phasing out of LIBOR and will work to minimize the impact of any LIBOR transition. The consequences of these developments cannot be entirely predicted, but could include an increase in the cost of our variable rate indebtedness.exposure.

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Unforeseen exposure to additional income tax liabilities may negatively affect our operating results.

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Our distribution of taxable income is subject to domestic tax and, as a result of our significant manufacturing and sales presence in foreign countries, foreign tax. Our effective tax rate may be affected by shifts in our mix of earnings in countries with varying statutory tax rates, changes in reinvested foreign earnings, alterations to tax rates, regulations or interpretations and outcomes of any audits performed on previous tax returns.

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Our operating results could fluctuate significantly.

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Our quarterly and annual operating results are affected by a wide variety of factors that could materially adversely affect revenues and profitability, including:  the timing of customer orders and the deferral or cancellation of orders previously received, the level of orders received which can be shipped in a quarter, fulfilling backlog on a timely basis, competitive pressures on selling prices, changes in the mix of products sold, the unavailability or delays in the receipt of critical inventories, the timing of investments in engineering and development, development of and response to new technologies, and delays in new product qualifications.

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As a result of the foregoing and other factors, we may experience material fluctuations in future operating results on a quarterly or annual basis which could materially and adversely affect our business, financial condition, operating results and stock price.

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We may never realize the full value of our substantial intangible assets.

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These intangible assets consist primarily of goodwill, customer lists, trade names and patented technology arising from our acquisitions. Goodwill is not amortized; it is tested at least annually or upon the occurrence of certain events which indicate that the assets may be impaired. Definite lived intangible assets are amortized over their estimated useful lives and are tested for impairment upon the occurrence of certain events which indicate that the assets may be impaired. We may not receive the recorded value for our intangible assets if we sell or liquidate our business or assets. In addition, intangible assets with definite lives will continue to be amortized. Amortization expenses relating to these intangible assets will continue to reduce our future earnings.

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Failure of our internal controls over financial reporting could limit our ability to report our financial results accurately and timely or prevent fraud.

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We believe that effective internal controls are necessary to provide reliable financial reports and to assist in the effective prevention of fraud. If we are unable to detect or correct any issues in the design or operating effectiveness of internal controls over financial reporting or fail to prevent fraud, current and potential customers and shareholders could lose confidence in our financial reporting, which could harm our business and the trading price of our stock.

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Our operating results depend in part on our ability to contain or reduce costs. There is substantial price competition in our industry and upward pressure on material and labor costs. Our success and profitability will depend on our ability to maintain a competitive cost and price structure.

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Our efforts to maintain and improve profitability depend in part on our ability to maintain or reduce the costs of materials, components, supplies and labor, including establishing production capabilities at our low cost regional subcontractors. While the failure of any single cost containment effort by itself would most likely not significantly impact our results, we cannot give any assurances that we will be successful in controlling material and labor costs to maintain a competitive cost structure.

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There is substantial price competition in our industry, and our success and profitability will depend on our ability to maintain a competitive cost and price structure. We may have to reduce prices in the future to remain competitive. Also, our future profitability will depend in part upon our ability to continue to improve our manufacturing efficiencies and maintain a cost structure that will enable us to offer competitive prices in the face of upward pressure on material and labor costs. Our inability to maintain a competitive cost structure could have a material adverse effect on our business, financial condition and results of operations.

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LEGAL AND REGULATORY RISKS

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Our international operations expose us to legal and regulatory risks, which could have a material effect on our business.

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Our profitability and international operations are, and will continue to be, subject to risks relating to changes in foreign legal and regulatory requirements. In addition, our international operations are governed by various U.S. laws and regulations, including Foreign Corrupt Practices Act (FCPA), the U.K. Bribery Act and other foreign anti-bribery laws. The FCPA generally prohibits companies and their intermediaries from making improper payments to foreign government officials for the purpose of obtaining or retaining business. Other countries in which we operate also have anti-bribery laws, some of which prohibit improper payments to government and non-government persons and entities. Any alleged or actual violations of these regulations may subject us to government scrutiny, severe criminal or civil sanctions and other liabilities and could negatively affect our business, reputation, operating results and financial condition.

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Our inability to adequately enforce and protect our intellectual property or defend against assertions of infringement could prevent or restrict our ability to compete.

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We rely on patents, trademarks and proprietary knowledge and technology, both internally developed and acquired, in order to maintain a competitive advantage. Our inability to defend against the unauthorized use of these rights and assets could have an adverse effect on our results of operations and financial condition. Litigation may be necessary to protect our intellectual property rights or defend against claims of infringement. This litigation could result in significant costs and divert our management’s focus away from operations.

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We are subject to a variety of litigation and other legal and regulatory proceedings in the course of our business that could adversely affect our financial results.

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We are subject to a variety of litigation and other legal and regulatory proceedings incidental to our business, including claims for damages arising out of the use of products or services and claims relating to intellectual property, employment, tax, commercial disputes, competition, sales and trading practices, environmental, personal injury, insurance coverage, acquisition, as well as regulatory investigations or enforcement. We may also become subject to lawsuits as a result of past or future acquisitions including liabilities retained from, or representations, warranties or indemnities provided in connection with these acquisitions. These lawsuits may include claims for compensatory damages, punitive and consequential damages and/or injunctive relief. The defense of these lawsuits may divert our management’s attention, we may incur significant expenses in defending these lawsuits and we may be required to pay damage awards or settlements or become subject to equitable remedies that could adversely affect our operations and financial results. Moreover, any insurance or indemnification rights that we may have may be insufficient or unavailable to protect us against such losses. We estimate loss contingencies and establish reserves based on our assessment where liability is deemed probable and reasonably estimable given the facts and circumstances known to us at a particular point in time. Subsequent developments may affect our assessment and estimates of the loss contingencies recorded as liabilities. We cannot guarantee that our liabilities in connection with litigation and other legal and regulatory proceedings will not exceed our estimates or adversely affect our financial results and reputation.

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Our business is subject to environmental regulations that could negatively affect our operating results.

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Our worldwide operations are subject to environmental laws and regulations that impose various environmental controls on the manufacturing, transportation, storage, use and disposal of hazardous chemicals and other materials used in, and hazardous waste produced by the manufacturing of our products. Conditions relating to our historical operations may require expenditures for clean-up in the future and changes in environmental laws and regulations may impose costly compliance requirements on us or otherwise subject us to future liabilities. Additional or modified regulations relating to the manufacture, transportation, storage, use and disposal of materials used to manufacture our products or restricting disposal or transportation of our products may be imposed that may result in higher costs or lower operating results. In addition, we cannot predict the affect that additional or modified environmental regulations may have on us or our customers.

Item 2. Properties.

As of December 31, 2021,2022, the Company occupies facilities as follows:

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The Company’s management believes the above-described facilities are adequate to meet the Company’s current and foreseeable needs. Operating leases for the Company’s properties expire at various times through 2033. Upon the expiration of the Company’s current leases, management believes that the Company will be able to secure renewal terms or enter into leases for alterative locations at market terms.

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Item 3. Legal Proceedings.

The Company is involved in certain actions that have arisen out of the ordinary course of business. Management believes that resolution of the actions will not have a significant adverse effect on the Company’s consolidated financial statements.

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Item 4. Mine Safety Disclosures.

Not applicable.

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We remain focused on executing our strategy for growth while streamlining the organization and emphasizing continuous improvement in quality, delivery, cost and innovation as we drive the One Allied approach and expand our value proposition for our customers. Solid strides continue to be made with our multi-product, fully integrated solutions that are leading to increased business. Also, we continue to build a pipeline of exciting market-based application opportunities. Sales cycles are long and the time from being selected for the solution development to full rate production can be longer, yet we believe we continue to build a scalable foundation which can deliver strong returns on those investments.

Our Strategy

Our growth strategy is focused on becoming a leading global controlled motion solution provider in our selected target markets by further developing our products and services platform to utilize multiple Allied Motion technologies which create increased value solutions for our customers. Our strategy further defines Allied Motion as being a “technology/know-how” driven company and to be successful, we continue to invest in our areas of excellence.

We have set growth targets for our Company and we will alignfocus and focusalign our resources to meet those targets. First and foremost, we invest in our people as we believe that attracting and retaining the right people is the most important element in our strategy. We will continue to invest significantly in applied and design engineering resources.

Our strategic focus is addressing the critical issues that we believe are necessary to meet the stated long-term goals and objectives of the Company. The majority of the critical issues are focused on growth and profitability initiatives for the Company.

One of these initiatives includes product line platform development to meet the emerging needs of our target markets. Our platform development emphasizes a combination of our technologies to create increased value solutions for our customers. The emphasis with new opportunities has evolved from being an individual component provider to becoming a solutions provider whereby the new opportunities utilize multiple Allied Motion technologies in a system solution approach. We believe this approach will allow us to provide increased value to our customers and improved margins for our Company, and are demonstrated in our acquisitions completed in the second quarter of 2022 as well as the fourth quarter of 2021. Our strong financial condition, along with AST continuous improvement initiatives in quality, delivery, and cost allow us to have a positive outlook for the continued long-term growth of our Company.

Outlook for 20222023

During 2021,In recent years, we continued to navigatenavigated a difficult environment related to the COVID-19 pandemic, while advancing our strategic priorities and delivering solid results. We experienced record orders during 2021in 2022, reflecting increases in our Vehicle and Industrial markets. This demand, combined with supply chain constraints, resulted in some inefficiencies and unintendedadditional costs as our teams worked hard to support and meet customer demand and schedules.

While the economic outlook for 20222023 remains uncertain and we expect continued upward pressure on material and labor costs, we believe we are in a strong operational, financial and reputational position. Our record level of backlog, diversified end market penetration and demonstrated agility position us well to perform across varied market trends and give us confidence that we can drive further efficiency, profitable growth and enhancedincreased free cash flow while delivering long-term value for our shareholders.

In 2022,2023, we will continue to focus on leveraging our resources to expand our business in our servedselected target markets. In addition, we will continue to execute the ongoing critical issues as defined by our boardBoard approved strategy.

The Company’s critical accounting policies and estimates include:

Revenue Recognition

The Company considers control of most products to transfer at a single point in time when control is transferred to the customer, generally when the products are shipped in accordance with an agreement and/or purchase order. Control is defined as the ability to direct the use of and obtain substantially all of the remaining benefits of the product. The Company satisfies its performance obligations under a contract with a customer by transferring goods and services generally in exchange for monetary consideration from the customer. The Company considers the customer’s purchase order, and the Company’s corresponding sales order acknowledgment as the contract with the customer. In the normal course of business, the Company does not accept product returns unless the item is defective as manufactured. The Company establishes provisions for estimated returns and warranties. All contracts include a standard warranty clause to guarantee that the product complies with agreed specifications.

Business Combinations

The Company allocates the purchase price of an acquired company, including when applicable, the acquisition date fair value of contingent consideration between tangible and intangible assets acquired and liabilities assumed from the acquired business based on their estimated fair values, with the residual of the purchase price recorded as goodwill. Third party appraisal firms and other consultants are engaged to assist management in determining the fair values of certain assets acquired and liabilities assumed. Estimating fair values requires significant judgments, estimates and assumptions, including but not limited to: discount rates, future cash flows and the economic lives of trade names, technology, customer relationships, and property, plant and equipment. These estimates are based on historical experience and information obtained from the management of the acquired companies and are inherently uncertain.

During the year ended December 31, 2021,2022, we completed three business combinations for an aggregate purchase price of $102,169.$57,658. We identified and assigned value to identifiable intangible assets of customer lists, technology, and trade names, and estimated the useful lives over which these intangible assets would be amortized. The estimatesestimated fair values